EV Tax Credits, Rebates and HOV Decals

There are a variety of financial incentives to buying an electric vehicle (EV) in general and a Tesla in particular. [This is a US- and California-centric post.]

Federal Tax Credit

The U.S. federal government and a number of states offer financial incentives, including tax credits, for lowering the up-front costs of plug-in electric vehicles (EVs).

The federal Internal Revenue Service (IRS) tax credit is for $2,500 to $7,500 per new EV purchased for use in the U.S. The size of the tax credit depends on the size of the vehicle and its battery capacity.  A 2018 Long-Range Tesla Model 3 qualifies for the maximum $7,500 credit. (To find out specific tax credit amounts for individual vehicles, visit FuelEconomy.gov’s Tax Credits for Electric Vehicles and Tax Credits for Plug-in Hybrids pages.)

This tax credit is available until 200,000 qualified EVs have been sold in the United States by each manufacturer, at which point the credit begins to phase out for that manufacturer. Tesla has just recently shipped their 200,00th car, and according to Electrek.co, Tesla buyers will lose the full $7,500 credit by the end of 2018 unless the law is changed, hitting $3750 for the first half of 2019 and $1875 in the second half of 2019.

To claim the credit, fill out IRS Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit. For vehicles acquired for personal use, report the credit from Form 8936 on the appropriate line of your Form 1040, U.S. Individual Income Tax Return. For vehicles purchased in 2010 or later, this credit can be used toward the alternative minimum tax (AMT).  To learn more about the law, visit the IRS’s Plug-in Electric Drive Vehicle Credit webpage.

CAV Decals and HOV Lane Usage

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The California Clean Air Vehicle (CAV) program authorizes a qualifying vehicle that meets specified emissions standards to be issued a CAV decal to allow single occupancy use of High Occupancy Vehicle (HOV or carpool) lanes. The fee for a clean air vehicle decal is $22. Apply for your stickers from the DMV.

The California DMV is now issuing a new red decal for all qualifying vehicles that will be valid until January 1, 2022.  For a vehicle purchased on or after January 1, 2018, the DMV cannot issue a CAV decal to an applicant who has received a consumer rebate through the Clean Vehicle Rebate Project (CVRP), below.

Clean Vehicle Rebate Program (CVRP)

California residents may also quality for a $2,500 rebate under the Clean Vehicle Rebate Program (CVRP), depending upon the type of vehicle and your annual income.

Depending on your income, you may not qualify for the CVRP or you may have to choose between the CVRP rebate and the CAV decals. For EVs (as opposed to fuel-cell vehicles) if you’re above the income limit, CAV decals are your only choice. An applicant whose gross annual income is above specified thresholds must choose between a CAV decal or a CVRP rebate.(See Question #6 in the FAQs.) The income limits are

  • 150,000 for single filers
  • $204,000 for head-of-household
  • $300,000 for joint filers

PG&E Clean Fuel Rebate

Pacific Gas & Electric also offers a $500 rebate if you buy or lease a new EV. The application procedure is simple and the rebate checks arrive within just a few weeks.

Those CAV Decals!

The federal $7,500 tax credit (which you claim on your next-year tax filing) and the $500 PG&E rebate are no brainers. If you’re below the income limits, you’ll have to choose between the $2,500 California rebate or the CAV decals.

Where I live in the San Francisco Bay Area, CAV decals are of questionable value. The HOV lanes are usually as crowded as the non-express lanes due to carpoolers, EVs and scofflaws. But there’s something about preserving the option that makes the CAV decals “nice to have”. The problem is that they’re particularly ugly and you have to apply four of them in a variety of specific locations on your vehicle. For a car like mine, where I’ve modified the finish, removed logos, blackened the chrome, etc., it’s a real shame to mess up the look of the car with decals. Bright red stickers on a very plain, matte blue car? Nah, I don’t think so!

The folks at RPMTesla, and others, have come up with a pretty good compromise solution. Rather than attach the CAV Decals directly to your paint or (in my case) vinyl wrap, you can apply the decals to pre-cut pieces of clear vinyl, which you then apply to your car. This way, you can remove the decals at any time without damaging either the decals or the car (or wrap) and even re-apply the decals later. The kit from RPMTesla costs only $19.00 plus shipping. ($24 total to California.)

Personally, I’ve purchased the RPMTesla kit and the CAV decals, but I have yet to put them on the car. Not sure if I will or not. At least I have that option. I’ve also received the $500 PG&E rebate and will apply for the full $7,500 federal tex credit on my 2018 tax returns. Together, these bring the cost of my car from $56,000 down to only $48,000 plus tax and license fees.

Configuration

On March 31, 2016, I went to the local Tesla store to plunk down a $1,000 deposit on the long-anticipated Model 3. No one had seen one, let alone driven one. There was a line out the door and down the street and I soon learned it wasn’t moving much. There were probably 100+ people in front of me, so I left, went home, and made my deposit from home later that evening. I was probably more than #100,000 of the 180,000 who gave deposits in those first 24 hours, so I figured I’d be waiting a while.

In March 2018, 24 months after all those Day One deposits, it looked like Tesla was getting ready to deliver Model 3s to new customers. They had been slowly delivering cars to some employees and existing owners of other models for the previous six months or so. Hoping I’d get to configure my car soon, I rented a Model 3 for 24 hours from a Tesla employee via Turo. My wife and I ran some errands and put about 100 miles on it. The car was everything I’d hoped for.

26 months after paying the deposit, and after checking the Tesla website many times each day, I discovered I could now configure my car. Of course I’d been planning my configuration for some time, and I was pleased to discover that my chosen config was identical to the first version of the car Tesla was producing. It would be the only configuration (except for color, wheels, interior and autopilot options) available for the first three months.

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You can see the config from the delivery sticker.

  • Basic Model 3 with Rear Wheel Single-Motor Drive (standard). 0-60mph in about five seconds. $35,000
  • Long-Range Battery. 310 miles vs. 220miles for the standard battery. $9,000 upgrade.
  • Premium Upgrades. Power, heated seats; center console; premium audio system (excellent!), tinted glass roof; dimming/folding/heated side mirrors; driver profiles; LED fog lamps. $5,000 package.
  • Deep Blue Metallic paint. An extra $1,000 for those shiny little flakes.
  • 18″ Standard Wheels with the removable Aero covers.
  • Enhanced Autopilot. $5,000. Doesn’t include the future Full Self-Driving Capability, but does include (today!) Auto Lane Change, Autosteer (stay in lane), Traffic-Aware Cruise Control (great for stop-and-go traffic), Autopark (parallel and back-in) and Summon (in  and out of the garage, for example).
  • Total $56,000 plus tax and license.

So what didn’t I get?

  • Full Self-Driving Capability. It’s a $3,000 increase, or pay $5,000 to update at a later date. This is a “future” feature. It doesn’t exist yet. Given the complexity of the task and all of Tesla’s many delays, I figure I might not still own the car by the time they offer this. So I opted out at this time.
  • Dual-Motor All-Wheel Drive. 0-60mph in about 4.5 seconds. $4,000 increase. I don’t need to drive in snow, mud, etc.
  • “Performance” Dual-Motor All-Wheel Drive. 0-60mph in 3.5 seconds. A $15,000 upgrade over the base price or $11,000 more than the non-performance AWD version. I had driven a basic rented Model 3 two months prior, so I knew the basic car was plenty fast enough for me.
  • 19″ Sport Wheels. $1,500 upgrade. The standard 18″ wheels offer a smoother ride. Besides, I like the looks of both the standard Aero covers as well as the standard wheel that’s underneath if you remove the Aeros.
  • Premium White Interior. $1,500 upgrade. White? Really?

And what do I think after three months (although admittedly, I still haven’t driven my own car)?

I’m quite happy with the choices I made. The only one I even question is the $9,000 long-range battery. That’s a big chunk of change, particularly considering that the 220-mile battery would probably be just fine for me except for 4-6 days per year when I might make a long trip to Oregon or Southern California. That standard battery still isn’t supposed to be available for another 6-9 months (ie, 2019Q1 or Q2), and since my old car (a Lexus 450X) was totaled in May, I’d have had to buy something else in the meantime. All things considered, I’m very happy to have the long-range batteries.

Street Composites

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YOU, Doug Kaye, 2015 (click to view large)

Two years ago I saw the 2006 work by Jeff Wall entitled “In Front of a Nightclub”. It made a strong impression on me, even more so when I learned that Jeff’s images are entirely staged, right down to the litter on the street. (This image is huge: 226 x 361 cm — about 7.5 x 12 feet — so the people are nearly half life-size.)

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In Front of a Nightclub, Jeff Wall, 2006 (ArtBlart.com)

 

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